Recapitalization And Consolidation Exercise In The Banking Industry

Project and Seminar Topics with material for Banking and Finance

Project and Seminar Topics with material for Banking and Finance


Abstract


The recapitalization and consolidation exercise in the banking industry by the former Central Bank of Nigeria Governor, professor Charles Chukwuma Soludo has raised much argument among the bank regulators, promoter and depositor as if shoring up of ban capital base is a new phenomenon in Nigeria.


Table of Content


Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 statements of the problems
  • 1.3 Objectives of the study
  • 1.4 Research Question
  • 1.5 Statement of hypothesis
  • 1.6 Significance of the study
  • 1.7 Scope of the study
  • 1.8 Limitation of the study
  • 1.9 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 Main causes of consolidation in Nigeria banking sector
  • 2.3 Benefits of consolidation in Nigeria banking sector
  • 2.4 Bank recapitalization: The imperatives, implications, Options and strategies for banks
  • 2.5 How banks recapitalization affects business
  • 2.6 Effects of post-consolidation on business in Nigeria
  • 2.7 Post bank recapitalization and consolidation exercise in Nigeria

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sources / methods of data collection
  • 3.4 Population and sample size
  • 3.5 Sample techniques
  • 3.6 Validity and reliability of measuring instrument
  • 3.7 Methods of data analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Introduction
  • 4.2 Analysis of data
  • 4.3. Test of hypothesis
  • 4.4 Interpretation of result

Chapter Five

5.0 Summary, Conclusion and Recommendations

  • 5.1 Summary of findings
  • 5.3 Conclusions
  • 5.4 Recommendations
  • 5.5 Bibliography
  • 5.6 Appendix
  • Questionnaires

Chapter One


1.0 Introduction

1.1 Background Of The Study

The recapitalization and consolidation exercise in the banking industry by the former Central Bank of Nigeria Governor, Professor Charles Soludo has necessitated the need for different organization to engage in corporate consolidation (mergers and acquisition). The concepts of recapitalization refer to the current trend of compelling all commercial banks to raise the capital base from two billion to twenty-five billion Naira by the Central Bank of Nigeria on or before 31st December 2005. This has sent some of these banks on the move to consider merger and acquisition as a survival strategy.

Where We Were Before Consolidation

89 banks with 3,382 branches predominantly in the Urban centres as at June 2004 characterized by structural and operational weaknesses such as

Low capital base: –

Dominance of a few banks insolvency and illiquidity. Over dependence on public sector deposits and foreign exchange trading.

Weak corporate governance: –

A system with low depositor confidence. Bank that could not real sector of the compared to Africa 27% for developed countries.


1.2 Statement Of The Problems

Business organizations are recently seeing consolidation (mergers and Acquisition) as an alternative means of recapitalizing. The cements trend of compelling all commercial banks raise their capital base from two billion to twenty-five billion naira by CBN on or before 31st December 2005 has sends some of these banks on their heels to consider merger and Acquisition as a survival strategy.

The expected problems regarding consolidation are:

There exits a high degree of calculated risk taking to top opportunities that come the way of business, but there is risk avoidance in Nigeria Business and where risk is low, development is also low and industrial advancement becomes near static.

Consolidation could be very expensive venture in terms of funds required to prosecute it successfully. Corrupts practice of public and private sector levels are another impediment. This need to be discouraged and incidence of corrupt practices should be severely punished because consolidation deals require confidence and trust to promote consummation.

Nigeria suffers anemically from lack of information which may unfortunately hinder significant leaps in business combination.


1.3 Objectives Of The Study

The fundamental objectives of this study are:-

  1. To assess the implication of consolidation on the banking industry.
  2. To examine the impact of consolidation on the Nigeria banks
  3. To highlight possible challenges posed by the policy of the bank consolidation.
  4. Assess Nigeria banks before consolidation.
  5. Identify the benefits of bank consolidation.
  6. Evaluate the prospect of banks after consolidation
  7. Assess the implication of consolidation on bank in Nigeria.

1.4 Research Question

The questions on this research work are:-

  1. Is there significant relationship between capitalization and liquidity ration of bank in Nigeria?
  2. Is there significant relationship between capitalizations and to deposit ration?

1.5 Statement Of Hypothesis

Banidam (2001) defined hypothesis as a tentative answer to the problem.

The following hypothesis will be formulated from the objective and will be verified in the course of this research work and noted as null from guide us in problem that is induced in this research work.

Hypothesis:– There is no significant relationship between capitalization and liquidity ration of banks in Nigeria?
Ho:- There is no significant relationship between capitalization and loan to deposit ration?


1.6 Significant Of The Study

Significant of the study is to add to the general body of knowledge, enlighten the general public on the effects of the bank consolidation on the performance of banks in Nigeria. And also explain the challenges of bank consolidation.
This research work would also establish that fact that consolidation (merger and acquisition) is a veritable means for fostering banking growth.


1.7 Scopes Of The Study

The scope of the study is to know the challenge of bank consolidation. Due to the financial constraint coupled with available, the research will make uses of available materials in the Securities and Exchange Commission’s library. Central bank of Nigeria (CBN) and Association of issuing House of books relevant to the research topic will be consulted and the internet.


1.8 Limitation Of The Study

This research work intends review how recapitalization exercise in Nigeria has brought about immense change in the banking industry by using two banks namely: Fin Bank and Fidelity Bank Plc Owerri Imo State respectively within the period of 2002 to 2011. This research work will concern itself on how the effort of the Federal Government of Nigeria through the help of Central Bank of Nigeria has set up some corrective measure to put in place the activities of the commercial banks.


1.9 Definition Of Terms

a. Bank Re-Capitalization:

This is the act of supplying long-term funds of the Owners of the bank to meet the requirement of monetary authority. Osiegbu (2005).

b. Consolidation:

This is the reduction in the number of banks and other deposit taking institution with a simultaneous increase in the size and concentration of the consolidation entities in the sector (BIS, 2001:2)

c. Merger:

It is the combination of two or more separate firms into a single firm.

d. Acquisition:

It is where a company takes over the controlling of another company.

f. Modus Operandi:

A particular method of working or dealing with a task.

g. Cost-Cutting:

Reduction in the money spent on something because of financial difficulty.

i. Lay-off:

To dismiss a worker from a job especially temporarily when there is no work to do.

j. Shareholder:

An owner of shares in a business company.

k. Reform:

The act of making something more better by correcting or making improvements.

l. Banking sector:

An organization of various banks that provides financial services and are been supervised by the (CBN).


Chapter Five


5.0 Summary, Conclusion, And Recommendation

5.1 Summary

The study reviews that recapitalization and consolidation exercise has significant influence on the lending activities of banks customers confidence and patronage, on the efficiency of bank services and lastly on the profitability of banks.

From the extensive findings through reading, interviewing and investing actions on this research study, the study came up with some relevant findings which should critically accessed and considered by the end users. This findings include the following:

  1. That the recapitalization can help in the revitalizing of the banking industry and financial system to solve attendant problems imposed by monetary and fiscal policy.
  2. It also discovered that recapitalization and consolidation of banks will produce the emergence of bigger, stronger and better banks, improve financial intermediation and boost public confidence and banking habits.
  3. The study revealed that recapitalization exercise has no significant influences on the lending activities of the bank.
  4. Recapitalization of banks has a significant effect on the efficiency of bank services.
  5. The N25 billion serves as an encouraging index to measure strength of banks.
  6. Also, through recapitalization, the health status of the banking system will be improved to enable them effectively carryout banking business locally and internationally.

5.2 Conclusion

The actual importance of recapitalization and consolidation exercise on the banking sector has been looked upon in this research work and it was discovered that recapitalization and consolidation is aimed at improving the activities of banking sector to purge out every misconduct in our financial system such as bank distress; liquidation and so on it then lies on the government at the federal level to come out with blue prints that would help sustain the continued growth and efficiency of service banks in Nigeria for the N25 billion mark may hot stand the test of time with respect to competition from the international banking system in effect, banks should raise their capital base beyond the CBN statutory requirement to spur confidence in their customers, widen their scope of operation via interdiction of more bank friendly services. Incessant change of government policies towards the banking sector should be curbed in order not to encourage slow-paced development other wises her financial system may not achieve its desired objectives.


5.3 Recommendations

At this point in this work, there is need to proffer some recommendation that will sway events towards sustained growth of the financial system.

  1. The federal government should intensify its effort in the area of sustaining policies that would help transform the banking sector to meet international repute.
  2. The Central bank of Nigeria should encourage banks to raise their capital base beyond the N25 billion mark and should even seek means of doubling the capital base come 2010.
  3. Stakeholders in the banking industry should come up with a holistic plan inspiring confidence in banks in the future.
  4. For the recapitalized and consolidated banks to avoid going back to the “distress syndrome” era, the CBN has the enormous responsibility of ensuring that the banks are supervised effectively and all loopholes backed to avoid abuse.
  5. Monetary tools such as selective credit control should be carefully used to raised level of growth of the financial system and economy in general.
  6. The proliferation of banks (community) and micro-finance banks should be based strictly on CBN stipulations and capital base requirements and special deposits. This will help reduced the mounting procures from huge investors.

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